How the next president could bring growth to everyone

By Felix Salmon | September 8, 2015 | 1:52pm

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If there’s one thing that all of America’s presidential candidates can agree on, it’s that economic success has to include everybody–not just the rich. The United States is a very rich country, but that wealth is far from evenly distributed, and what’s needed are policies which give a much-needed boost to the poor and the middle class.

Well, the World Economic Forum has just released a massive report on what it calls “inclusive growth and development,” which goes down a long list of indicators to show where countries are doing well, and where they’re doing badly. If you spend a bit of time looking at the page for the United States, which ranks it against 29 other rich countries on a variety of measures, it’s easy to see where our presidential candidates should be focusing their attention. And because this report comes from the Forum, which is home to more plutocrats and billionaires than any other club on the planet, it should be reasonably palatable to politicians on either side of the aisle.

1. Employment and labor compensation: 28th out of 30

America does worst on measures of employment. It’s in the middle of the pack on big-picture things, like the total number of people with jobs, youth unemployment, and the number of women with jobs. But it’s bad on occupational injuries (ranking 22nd out of 27 countries) and it’s dreadful (29th out of 29) on employment protections. In America, much more than in any other rich country, you can be fired for pretty much any, or no, reason. That helps the rich, who tend to be business owners, and hurts the poor, who tend to be the most vulnerable employees.

America is even worse when it comes to wages, and how much the people at the bottom of the greasy pole actually get paid. (The people at the top, needless to say, are fine.) The United States ranks 30th out of 30 on what the report calls “wage and non-wage compensation,” with more than 25% of workers counting as low-paid – that’s 24th out of 24. America also, unsurprisingly, does very badly on measures of unionization and the probability that you’re covered by some kind of collective bargaining agreement. And it’s not great to be a parent working in America: the country’s parental-leave policies are generally weak, while the cost of child care ranks very high as a proportion of the minimum wage.

So, what should the next president do? Keep on raising the minimum wage, for starters. Encourage and protect unionization, while implementing parental leave laws along with protection from being capriciously fired. Government-subsidized childcare would also help; another name for that, of course, is “pre-K education.” Which we’ll come to next.

2. Education and skills: 21st out of 30

America also does pretty badly on the way in which it gives its workforce the skills they need to succeed.

Americans certainly spend a lot of time in school: the United States comes first out of 30 countries on mean years of schooling. But that’s entirely because so many Americans go to college. When it comes to early education, America is doing very, very badly. It’s 26th out of 29 in terms of the proportion of kids who enroll in school before first grade; 29th out of 29 in terms of primary school enrollment; and 30th out of 30 in terms of secondary school enrollment. (Then, in a huge jump, America is 3rd out of 30 in terms of tertiary school enrollment.) One bright spot: we’re No. 1 in terms of the ratio of girls to boys in school.

The schools themselves are pretty much in the middle of the pack, with America ranking 17th out of 30 in terms of the overall quality of its education system. But there’s one area which clearly needs a lot of improvement: we’re 27th out of 30 in math scores.

More to the point, America does worse by its poorer students. It ranks 25th out of 30 in terms of educational equity, as measured by things like how socioeconomically diverse our schools are, and how likely a poor student is to score in the top 25% on a standardized test.

So, what should the next president do? Make a concerted push for every American child to go to school, including making it much harder for parents to homeschool their children. Expand school districts so that they become more diverse, and rejigger school funding so that poor folks have vastly improved to good schools. Expand pre-K education. And work on those math skills!

3. Corruption and rents: 20th out of 30

America is pretty corrupt, by rich-country standards, and is beset by a lot of what economists call “rents.” (That’s where rich people extract money from the middle classes just by dint of ownership, without doing any actual work.) The United States comes 21st out of 30 on business and political ethics, and 18th out of 30 on how concentrated the rentier class is.

So, what should the next president do? Simplify the tax code, taking out loopholes which invariably benefit the rich. Crack down on political corruption, at every level from the municipal to the federal. And get regulators to encourage competitors of America’s biggest companies: right now, America’s regulators rank 29th out of 29 in terms of how much they protect and coddle the companies they’re meant to be overseeing.

4. Basic services and infrastructure: 19th out of 30

This section is broadly split between general infrastructure, where the United States is in the middle of the pack, and healthcare infrastructure, where it’s towards the bottom.

In general infrastructure, the United States needs to spend more on transportation, but overall we’re doing OK: we have relatively few homes without basic facilities, and, surprisingly, we come out well on broadband affordability, too.

On healthcare, however, there’s a very, very long way to go. America is 30th out of 30 in terms of inequality in life expectancy: poor Americans will drop dead long before rich Americans do. Healthcare services are not particularly available to the poor (we’re 27th out of 30 on healthcare availability), and overall the United States is 23rd out of 30 on the quality of its healthcare services.

So, what should the next president do? Spending money on healthcare clearly isn’t the answer here. That’s the one thing America does better than anybody else, and we’re doing far too much of it already. But targeted interventions aimed at improving the healthcare of the poor could easily pay for themselves, because unhealthy workers are never productive workers. And let’s invest in transit, too, which helps those workers get to their jobs more easily and quickly.

5. Financial intermediation of real economy investment: 16th out of 28

This is the banking bit, and it turns out that America’s financial services industry is actually pretty good, by rich-country standards. They serve small businesses well, with accessible and affordable branches and easy access to credit. It’s also easier to raise equity funding in the United States than it is anywhere else. The United States does underperform in the proportion of the poorest 40% without a bank account, though. On that metric, America comes in 22nd out of 27th. The country also comes in 24th out of 24 on bank lending to non-financial corporations, but that might just reflect how easy it is for those companies to borrow money in other ways.

So, what should the next president do? Work with the Consumer Financial Protection Bureau to ensure that banks provide their services to everybody, and not just the rich. One easy way to do that would be loosening restrictions on credit unions, which right now find it hard to compete with banks.

6. Fiscal transfers: 15th out of 30

This is the big one: taxes. The American tax code actually comes out pretty well in this survey, because it encourages people to work, even if it isn’t very progressive. (The rich pay more taxes in America, but not as much as they do in other rich countries.)

The problem isn’t really how taxes are raised, so much as it is how they’re spent: America comes in 28th out of 30 for “social protection.” It doesn’t spend enough money on social services, the money it does spend is wasted, and Social Security, in particular, does a pretty bad job of supporting poor, elderly Americans.

So, what should the next president do? Don’t spend too much effort trying to make the tax code itself more progressive. Instead, strengthen Social Security and unemployment insurance. Make sure that if you fall down in America, the state will give you a helping hand when you need it most.

7. Asset building and entrepreneurship: 2nd out of 30

This is the one area where America does really well. The United States ranks 1st among 30 countries for small business ownership, making it easier to start businesses (and to resolve them when they fail) than any other rich country. The only real area where America has room for improvement is in the affordability of urban housing.

So, what should the next president do? Build more urban housing, and concentrate on more urgent issues than small business, which is doing fine. (When politicians talk about “small business owners,” that’s often code for the richest 1% of the population–people like politically-powerful owners of car dealerships.) If you want to bring growth to everybody in America, don’t concentrate on the entrepreneurs. Concentrate on the rest of us.